What Is the Difference Between ERP and Accounting Software?

Business management technology has evolved greatly over the years. While entry-level accounting software is typically used when starting a business, growth means moving to an enterprise resource planning (ERP) system with more powerful financial management. As you consider which investment makes the most sense, it’s important to understand your options. What is the difference between ERP and accounting software? We discuss the similarities and differences between these two powerhouses below.

ERP and Accounting Software Functionality

ERP systems and accounting software are worlds apart, yet they are often discussed interchangeably. Here are the main differences:

Accounting software: Accounting software is a standalone solution with specific functionality for managing the books—such as accounts payable and receivables, payroll and other financial transaction management. More robust accounting systems include general ledger management, billing, purchase orders and sales order systems, timesheets, expense management and electronic payments. The limitations are apparent when a business grows, adds locations or introduces international transactions.

ERP solution: Similar to accounting software, the features and functions built into ERP systems can also vary greatly. However, most ERP systems offer more robust functionality than accounting software and will enable a business to expand operations, create a flexible general ledger and reports and easily manage and convert foreign currency. Businesses considering growth should think hard about investing in an ERP solution right off the bat, saving time and frustration when you have to make the move later.

Value-Added Functionality of ERP

Think of ERP as a platform of sorts, that includes business operations, accounting and financial management features. This is your starting point. From here, you add other features and functionality you need to manage your business. For example, you could add asset management, human resources, supply chain and inventory management, project management, manufacturing and other operational features that support your unique business operations.

Perhaps the biggest value-add of ERP over standard accounting software is the ability to integrate your systems and data so you can operate seamlessly. Other ways ERP delivers a competitive edge:

Keep technology aligned with business operations: Businesses change over time, but accounting software does not. ERP is flexible and can remain aligned with your business needs through periods of growth, with acquisitions or expansions, and as the marketplace changes.

Improve productivity: The seamless integration within ERP means data is shared between modules. A purchase order can automatically be turned into a sales order, data is used to update inventory counts and then used for invoicing. Reducing redundant data entry between systems saves valuable time and reduces the risk of errors. Workflows and other automations streamline common daily tasks, improving consistency and accuracy, while also improving productivity.

Boost sales and profitability: ERP puts key data at the fingertips of your leaders. Dashboards and reporting features make it easy to find and track key performance indicators. You gain a 360-degree view of your business from the front office through the back warehouse. Armed with this insight, you can identify ways to reduce waste, improve labor management, and hone in on profit margins. No more scouring endless spreadsheets to extract the information you actually need to make decisions.

ERP and Accounting Software Aren’t Interchangeable

While ERP and accounting software have many similarities related to finances, they absolutely aren’t the same. In addition to accounting and financial management support, modern ERP provides integration with other key business systems, budgeting and planning features, and powerful business intelligence features. It’s these differences that should put ERP high on your list for consideration. Contact The Wolcott Group for information about ERP for your unique business needs.